Pros and Cons of reverse entries

An entry that requires reversing includes amounts entered into the accounting system to allocate expenses that span two accounting periods.

For instance, if an invoice for an interest-only loan payment is due each month on the 15th, only one-half of the entry applies to the current month, while the other half of the entry applies to the next month. To accommodate this transaction, the accountant would expense half of the amount in the current month and make an adjusting entry for the second half of the amount. At the beginning of the next month, the accountant would need to reverse the adjusting entry to clear the account.

The advantage of using reversing entries is that it allows the accountant to reflect expenses in the period they occur.

The reversing entries to change these accounts back and avoid a double counting that might occur if the accountant fails to do so.